Rural Housing Financing

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Rural Housing Financing

  1. 1. Homebuyer Workshop
  2. 2. Introduction <ul><li>Homeownership and Rural Development </li></ul><ul><li>Where to get started and how Rural Development can help </li></ul><ul><li>Homeownership guidelines and Rural Development Financing Options </li></ul>
  3. 3. Agenda <ul><li>Homeownership </li></ul><ul><li>-Are you ready? </li></ul><ul><li>-Myths about Homeownership </li></ul><ul><li>100% Financing Options thru Rural Development </li></ul>
  4. 4. Overview <ul><li>Be prepared </li></ul><ul><li>Get ready before you apply </li></ul><ul><li>Explore All Options </li></ul><ul><li>If it sounds too good to be true, it probably is. </li></ul>Income Location Credit
  5. 5. Homeownership- Are you Ready? <ul><li>You should have a continuing and reliable source of income prior to applying </li></ul><ul><li>You should have a good credit history that shows you’re ready for homeownership </li></ul><ul><li>Your total debt should be manageable and you should be able to afford to take on the costs associated with homeownership </li></ul>
  6. 6. Myths About Homeownership <ul><li>Myth : You need great credit to become a homeowner </li></ul><ul><li>Fact : Your credit history should indicate a reasonable ability to meet </li></ul><ul><li>obligations as they become due </li></ul><ul><li>The following are forms of acceptable credit: </li></ul><ul><li> 1) No Credit </li></ul><ul><li> 2) Bankruptcy discharged more than 36 months prior to application </li></ul><ul><li> 3) A satisfied judgment or foreclosure (with no loss of security) which was completed 12 months prior to application </li></ul><ul><li>Myth : You need to put 20% down to afford a home. </li></ul><ul><li>Fact : Rural Development finances 100% </li></ul><ul><li>Myth : You can’t buy a home in the U.S. if you’re not a citizen. </li></ul><ul><li>Fact : If you are a legal resident, you can buy a home in the U.S. </li></ul><ul><li>Myth : If you’re late on your payments, you’ll lose your house. </li></ul><ul><li>Fact : Rural Development Direct Loans offer a moratorium up to 2yrs </li></ul>
  7. 7. How Rural Development Can Help <ul><ul><li>3 Ways Rural Development Can Help: </li></ul></ul><ul><ul><li>1) Direct Loan </li></ul></ul><ul><ul><li>2) Leverage Loan </li></ul></ul><ul><ul><li>3) Guaranteed Loan </li></ul></ul>
  8. 8. 502 Direct Loan <ul><ul><li>Purpose: </li></ul></ul><ul><ul><li>To provide home ownership opportunities to families with very low and low incomes (see adjusted income limits) </li></ul></ul><ul><ul><li>Loans may be used to buy, build, improve, or repair homes </li></ul></ul>
  9. 9. Eligibility <ul><li>Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance </li></ul><ul><li>Applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories </li></ul><ul><li>There is no required down payment </li></ul>
  10. 10. Terms <ul><li>Loans are for up to 33 years (38 for very low income or low income applicants below 60% MHI and who cannot afford 33 year terms). </li></ul><ul><li>Interest rate is set by Rural Development, currently the interest rate is 4.65% </li></ul><ul><li>Interest rate may be modified by payment assistance subsidy to as low as 1% </li></ul>
  11. 11. Terms <ul><li>Loan is with Rural Development </li></ul><ul><li>No application fee </li></ul><ul><li>No down payment </li></ul><ul><li>No mortgage insurance </li></ul><ul><li>No limit on “seller paid expenses” or gifts </li></ul><ul><li>Closing costs can be financed for very low income borrowers </li></ul><ul><li>Repairs may be financed </li></ul><ul><li>Rate may be subsidized to as low as 1% </li></ul>
  12. 12. Subsidy <ul><li>‘ Subsidy’ is the amount of your payment that the Government pays each month. </li></ul><ul><li>The subsidy is paid back at the time of sale or transfer of ownership. </li></ul><ul><li>When refinancing, subsidy can be included in the payoff or allowed to remain on the land records. </li></ul><ul><li>Amount of subsidy to be repaid is based on a current appraisal at the time, less closing costs and eligible improvements. </li></ul><ul><li>Subsidy repaid may be either the full amount received over the life of the loan or up to the appraised value. </li></ul>
  13. 13. Site & Building Requirements <ul><li>The property must be a single family dwelling or an approved condominium unit </li></ul><ul><li>Must be located in an eligible area. See map. </li></ul><ul><li>Must be located on a public road or recorded maintenance agreement for a private road. </li></ul><ul><li>Property cannot have an in-ground pool. </li></ul><ul><li>Cannot be located in a flood plain unless flood insurance is obtained. </li></ul><ul><li>Property cannot be sub- dividable. </li></ul><ul><li>The dwelling must be decent, safe and sanitary or repairs financed with loan funds. </li></ul><ul><li>Property must meet RHS thermal standards. </li></ul>
  14. 14. Section 502 Leveraged Loan <ul><li>Can be originated by an approved lender of your choice or Rural Development. </li></ul><ul><li>Borrower makes two separate payments, one to Rural Development and one to the Lender. </li></ul><ul><li>Allows the borrower to receive less subsidy. Therefore less owed back. </li></ul><ul><li>Allows the borrow to get the lower (CHFA) rate. </li></ul><ul><li>The Rural Development portion may be subsidized as low as 1%. </li></ul>
  15. 15. 502 Guaranteed Loan <ul><li>Purpose: </li></ul><ul><li>To help moderate income families purchase homes in rural areas. </li></ul><ul><li>Funds can be used to build or purchase a home. </li></ul>
  16. 16. Eligibility <ul><li>See income guidelines attached or visit the eligibility website: </li></ul><ul><li>http://eligibility.usda.gov/eligibility </li></ul><ul><li>The approved lender of your choice (see list) determines repayment feasibility, using repayment ratios. </li></ul>
  17. 17. Eligibility <ul><li>Applicants must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must be unable to obtain credit elsewhere, yet have a reasonable credit history. </li></ul>
  18. 18. Terms <ul><li>103.5% LTV </li></ul><ul><li>No Mortgage Insurance </li></ul><ul><li>30 year fixed rate </li></ul><ul><li>No loan limit </li></ul><ul><li>No limit on “seller paid expenses” or gifts </li></ul><ul><li>Fees and Repairs may be financed </li></ul><ul><li>No down-payment or reserves required. </li></ul><ul><li>One time Guarantee fee of 3.5% may be financed over the appraised value. </li></ul>
  19. 19. Guaranteed to compete! <ul><li>$175,000 loan 7% interest rate </li></ul><ul><li>Real estate taxes and homeowners insurance </li></ul><ul><li>are NOT included in these payments. </li></ul><ul><li>YOU BE THE JUDGE! </li></ul>
  20. 20. t RD 502 Direct loan at 1% $519.02
  21. 21. Helpful Websites <ul><li>Income and Eligible Area </li></ul><ul><li>h ttp://eligibility.sc.egov.usda.gov/eligibility </li></ul><ul><li>Free Annual Credit Report </li></ul><ul><li>www.annualcreditreport.com </li></ul>
  22. 22. Questions? <ul><li>Rita E. Bellinger , Area Loan Specialist </li></ul><ul><li>238 West Town Street </li></ul><ul><li>Norwich, CT 06360 </li></ul><ul><li>  </li></ul><ul><li>Phone: 860-859-5218 x207 </li></ul><ul><li>Fax: 860-859-5223 </li></ul><ul><li>Email: [email_address] </li></ul>

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